Golden Gate Petroleum (ASX: GGP) is moving to accelerate development of its core Permian Project in Texas with current operations to fracture stimulate three wells expected to double production from the current peak of up to 102 barrels of oil equivalent.
This is expected to occur once fraccing of the SRH-1 and SRH-2 wells across the Spraberry and Dean Intervals as well as the new SRH-6 well is completed.
The project has independently confirmed Proved and Probable (2P) Reserves of over 5 million barrels in the Spraberry Dean intervals on the 771 lease and hosts significant Contingent Resources in the Wolfcamp interval.
Daily oil and gas production is currently up to 102 barrels of oil equivalent though the company expects this to double initially following the fracture stimulation of the SRH-1 and SRH-2 wells across the Spraberry and Dean Intervals as well as the new SRH-6 well, which has being drilled and cased.
A new vertical well is being planned for October and will be its sixth vertical well on the 771 lease.
The company is also preparing to drill a new horizontal well on the 772 lease once the current issue with petroleum regulator, the Texas Railroad Commission (RRC), concerning depth severance in the Lind Wolfcamp Field is resolved.
Funding for its projects will continue to come from existing financial programs in place though the company is also working on several new funding programs including financing with debt which is designed to accelerate the current drilling program.
It is also looking at farming out equity in the project to fund further activities.
The company is also seeking a ruling from the Texas Court over the current dispute with Petro‐Raider that has been outstanding since 20 April 2011, which has prevented the company from arranging more traditional funding methods at cost effective pricing levels.
This is believed to have prevented the company from realising the full potential of its current leasehold position or the leases returned to the lessor earlier this year.
Permian Project wells
The company is currently producing oil and gas from five wells in the Permian Project with the SRH-1 and SRH-2 producing from just the Wolfcamp interval.
These are currently awaiting fracture stimulation across the Spraberry and Dean Intervals, which are the most productive in vertical wells.
It has also drilled and cased the SRH-6 well, which has been shut-in to prepare for fracture stimulation.
Separately, clean-out and testing operations are ongoing at the SRH-5H horizontal well.
772 lease drilling
The drilling of a new horizontal well on the 772 lease, which is one of the two key leases that make up the Permian Project, is waiting on the Texas Railroad Commission (RRC) resolving an issue concerning depth severance in the Lind Wolfcamp Field.
This dispute has an impact on all nearby areas where leases have been granted on a depth severance basis, and could apply to companies other than Golden Gate.
Drilling cannot proceed as the company would otherwise risk access or rights to production from the well. A ruling is expected in the next few months.
The company is asking the Texas Court to rule on its motion to dismiss some of the ancillary claims from the original filings by Petro‐Raider.
It noted that depositions taken so far clearly show that there was no collusion between parties to the original lease purchase.
In addition, it is also pursuing other strategies to simplify and accelerate the case.
The company noted that a decision either in favour or against it, would quantify the leasehold exposure and remove a primary impediment to a full development of the project.
It added that it remained open to reaching a settlement with Petro‐Raider that will be in both parties’ best interests.
With production expected to double in the near term, Golden Gate Petroleum would see a corresponding increase in cash flow.
In the longer term, the moves to accelerate development of the project will allow the company to realise its full value, leading to a re-rating of its value.
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